Plumb Safety: Prevent, Learn, Maximize: Lessons from Large Losses

By Veronica Wilkins, Underwriting Manager

PLM puts emphasis on consulting with our insureds and brokers and educating the industry on best risk management practices. One of the primary things we do internally is have monthly large loss meetings where management teams from various departments (underwriting, loss control, business development and claims) take a deeper look into some of the larger losses we have seen on our books. They analyze and evaluate losses from every perspective, whether the coverages in place were adequate, if safety measures and processes were enforced, and what could have been done to prevent the loss.

In the past we have informally spoken about these types of potential large losses, but we felt it was more appropriate to formalize our communication to you and our insureds on the loss experiences we are seeing on a global scale to better equip our insureds on a more frequent basis as weather patterns continually change and become more severe, costs to rebuild and repair are growing increasingly higher, and as supply chain issues and other economic factors continue to disrupt our industry. We want to continue to help our insureds prevent losses, learn from losses of others, and maximize their experience with us by improving their loss history from lessons learned, which will ultimately support their bottom line.

Moving forward, you and our insureds can expect to see more about the lessons we are learning from large losses through emails, guides, videos, and more. In the meantime, we want to share some recent findings important to business owners that you can share with your clients.

Lessons from Large Losses:

Flooding

Details: A flood loss due to heavy rain in a flood zone that historically has been known to be low risk for flooding. $1,012,327 incurred loss. These types of losses typically are six- to seven-figure losses.

When some of us think about flood losses, we may think of the coastal area only. However, if we’ve been taking note of what’s been happening with weather patterns, we know flooding happens beyond the coast.

Consider if your clients are next to any water resource such as a stream or lake and the impact that may have if their business was to experience flooding due to weather. What assets do they need protecting? Do they have all inventory right there onsite? If so, they may want to consider an offsite location to store some inventory in a more elevated space where water damage is less likely to happen.

There is not one response to address flooding as each location and risk is different. Could they be doing more? What could PLM do to help them with future flood losses?

Mobile Equipment Fires

Details: Wear and tear on hydraulic system causing total fire loss of mobile equipment. $130,344 incurred loss. These types of losses can run into the seven-figure range depending on where equipment and/or vehicle is housed.

Only 5% of car/mobile equipment fires are due to a collision. $6.5 million cars were recalled last year due to potential fire. This is very alarming, but what’s more concerning are older vehicles and mobile equipment that may not be a part of the recall that are equally or more dangerous. Some causes of fires in mobile equipment are defective fuel lines, electrical system failures, faulty battery, and mechanical flaws. How often are your clients checking their vehicles and mobile equipment and keeping up with preventative maintenance?

The proper use of software and qualified maintenance team could help mitigate these types of losses. A lot of our insureds have an in-house maintenance team to work on their mobile equipment and vehicles. An in-house maintenance team requires the company to ensure that employees are properly trained to manage such exposures. One of the common things we have seen in past losses is situations where the client’s maintenance team has not been on par with the expert analysis, which raises questions surrounding qualifications of an insured’s maintenance team. An in-house maintenance team is not a bad option as long as individuals are properly trained on a continuous basis. Are your clients investing in their worker’s skillset? Certification and recertification will vary state to state, but on average a mechanic should be recertified at least every five years to keep up with the changes in the industry. A third-party maintenance team is another option, which puts the responsibility on the third party, with the option to subrogate. If your client decides to work with a third party, you want to ensure that they have correct and up-to-date training and are properly insured.

Water damage

Details: Water damage due to pipe burst. $133,088 incurred loss.

Many of these types of plumbing claims are preventable.

Here are some things your clients can do to prevent a similar loss:

• Make sure they are using stainless steel over plastic fitting, as plastic is known to crack.
• They should have a professional plumber evaluate their overall plumbing exposure to determine if any other plumbing matters need to be addressed. If they take the route of an in-house team, make sure they are up to date on certifications and proper training.
• Depending on the type of pipes they have, determines its average life expectancy: PVC and brass pipes 40-70 years lifespan, copper average lifespan is 50 years, and galvanized steel pipes has a lifespan between 20-50 years.
• Regardless of the age of their plumbing, it is recommended to have it evaluated every one to two years as leaks, among other things, often happen with plumbing.

It’s much better to catch an issue sooner rather than later to mitigate water claims such as the above. Today, the internet of things (IoT) provides technology that allows the detection of water leaks. There are many devices in the marketplace that allows your clients to get immediate notification to their phone in the event of a leak.

Final Food for Thought:

Rising threat to businesses in 2022? Water!

It is not just the coastal areas that are being impacted by water as previously mentioned. Water is causing damage inland as weather patterns continue to change. What are your clients doing to protect their business? Are they being proactive? Do they have a disaster recovery plan in place? Do they need support from us to help them better prepare for such losses? Commercial building structural damage cost the industry $13.5B per year and the downstream economic impact cost at $50B.

Our Large Loss report is to create open and ongoing dialogue. Look for future emails where we will regularly share with you lessons that can be learned from real losses. By analyzing losses from multiple perspectives, it allows us to share ways to improve the overall safety conditions of your client’s business or to supplement the safety measures they have already taken.

Email me at vwilkins@plmins.com with your questions or feedback.